* ECB signals no June interest rate rise
* Euro falls nearly 2.0 percent vs US dollar
* Slide in commodities' prices helps boost dollar
(Recasts, updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 5 (Reuters) - The U.S. dollar soared nearly 2.0 percent against the euro on Thursday as concerns about a global economic slowdown, reflected in a slump in commodity markets, prompted investors to flee risky assets and high-yielding currencies and seek refuge in the greenback.
The slide in commodities also hurt currencies from
commodity exporting countries such as Australia and Canada. The
Australian dollar fell 1.4 percent to US$1.0568
The plunge in the euro, which had its worst day against the U.S. dollar since August last year, was triggered by comments from European Central Bank President Jean-Claude Trichet suggesting that euro zone interest rates were unlikely to rise next month.
But the impact of Trichet's comments were overshadowed by the drop in the prices of energy and metals prices after more weak U.S. economic data.
"It is clear to us that the market is caught with offside positioning and facing a barrage of growth and risk negative data," said Steven Englander, head of G10 foreign exchange strategy, at CitiFX in New York.
"The major question for next week is whether this is just a position squeeze, in which case a round or two of reserve manager buying will put risk back on, or whether investors significantly underestimated the fragility of the G10 and possibly emerging market countries to tightening and commodity price increases."
In late New York trading, the euro fell 2.0 percent to
$1.4526
ECB RATE RISE POSTPONED
The euro's fall came after the ECB left its benchmark interest rate unchanged as expected at 1.25 percent, but was triggered by Trichet's comments in which he failed to use the key words "strong vigilance" in his comments on inflation, suggesting a further ECB rate rise would not happen in June.
In the past, the ECB regularly used the phrase to signal a rate hike was only a month away.
"Going into the meeting, the market was split on the issue of whether the next hike would be in June or July, but Trichet quickly made it clear that the ECB will not hike at the June meeting," said Frank Hansen, senior economist at Danske Bank in Copenhagen.
Before the ECB meeting, the markets had priced a 40 percent probability of a June hike. The probability has now declined to almost zero, while the implied probability of a July rate increase was now at 75 percent, analysts said.
Further out on the yield curve, interest rate rise expectations were reduced more aggressively. The euro zone's refinancing rate is now expected to hit 2.0 percent next March -- a rate that before the meeting was expected to be reached late this year.
Against the yen, the euro fell 2.5 percent to 116.49 yen
Other euro-linked assets also fell. The CurrencyShares Euro
Trust
Overall option volume on this fund was 2.7 times the average daily levels with about 40,000 puts and 3,096 calls traded near the close on Thursday, according to options analytics firm Trade Alert.
Still, analysts believed the euro's decline was just a respite and the currency should make its way to $1.50 in fairly short order as part of an unwinding of safe-haven flows into the U.S. dollar during the financial crisis of 2008.
Market participants still expect the ECB to raise rates more rapidly than the Federal Reserve, which is seen holding U.S. borrowing costs at record lows until at least mid-2012.
Against the yen, the U.S. dollar fell below 80 yen for the
first time since March 18, the day central banks intervened to
weaken the Japanese currency after it hit a record high.
The strengthening of the yen prompted some traders to warn a second round of intervention could be on the cards. (Additional reporting by Steven C. Johnson in New York and Doris Frankel in Chicago)